This module allows you to analyze existing cross correlation between DOW and PowerShares SP 500 Quality ETF. You can compare the effects of market volatilities on DOW and PowerShares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DOW with a short position of PowerShares. See also your portfolio center. Please also check ongoing floating volatility patterns of DOW and PowerShares.
Given the investment horizon of 30 days, DOW is expected to generate 0.92 times more return on investment than PowerShares. However, DOW is 1.09 times less risky than PowerShares. It trades about -0.08 of its potential returns per unit of risk. PowerShares SP 500 Quality ETF is currently generating about -0.13 per unit of risk. If you would invest 2,624,696 in DOW on September 18, 2018 and sell it today you would lose (54,028) from holding DOW or give up 2.06% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding DOW and PowerShares SP 500 Quality ETF in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on PowerShares SP 500 and DOW is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DOW are associated (or correlated) with PowerShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares SP 500 has no effect on the direction of DOW i.e. DOW and PowerShares go up and down completely randomly.
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